THIS ANNOUNCEMENT AND THE INFORMATION CONTAINED HEREIN IS RESTRICTED AND IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA, SINGAPORE, HONG KONG OR ANY OTHER JURISDICTION IN WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE EU REGULATION 596/2014
THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND DOES NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES IN FARON PHARMACEUTICALS OY (“FARON”) OR ANY OTHER ENTITY IN ANY JURISDICTION IN WHICH ANY SUCH OFFER WOULD BE UNLAWFUL.
FARON HAS NOT TAKEN ANY ACTION, NOR WILL IT TAKE ANY ACTION, TO OFFER ANY OF THE SUBSCRIPTION SHARES OR ANY OTHER DOCUMENTS RELATING TO THE SUBSCRIPTION TO THE PUBLIC IN FINLAND, SWEDEN, NORWAY OR DENMARK, OR IN ANY OTHER JURISDICTION IN ANY FORM WHICH WOULD CONSTITUTE AN OFFER TO THE PUBLIC.
NEITHER THE SUBSCRIPTION SHARES NOR THE OPEN OFFER SHARES WILL BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES. THERE IS NO PUBLIC OFFERING IN THE UNITED STATES, THE UNITED KINGDOM OR ELSEWHERE. NEITHER THE THE SUBSCRIPTION SHARES OR THE OPEN OFFER SHARES HAVE BEEN APPROVED OR DISAPPROVED BY THE US SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY IN THE UNITED STATES, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THE SUBSCRIPTION OR THE OPEN OFFER OR THE ACCURACY OR ADEQUACY OF THIS ANNOUNCEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.
Faron Pharmaceuticals Oy
(“Faron” or the “Company”)
Subscription and Open Offer
TURKU – FINLAND, 5 August 2019 – Faron Pharmaceuticals Oy (“Faron”) (AIM: FARN), the clinical stage biopharmaceutical company, is pleased to announce a subscription of new ordinary shares in the capital of the Company (the “Subscription“) to raise proceeds of approximately € 1.12 million (£1.00 million) before expenses. The Subscription comprises the issue of 941,840 new ordinary shares (the “Subscription Shares“) at the issue price of of €1.19 per share (“Euro Issue Price“).
In addition, to provide Qualifying Shareholders (being those shareholders of the Company on the register of shareholders at the record date, which is expected to be on or shortly after 6 August 2019) (“the “Record Date“) with an opportunity to participate in the fundraise at a sterling equivalent issue price of £1.06 per per share (“Issue Price“), subject to completion of the Subscription, the Company proposes to make an open offer (the “Open Offer“) to all Qualifying Shareholders to raise additional gross proceeds for the Company of up to approximately €2.0 million (£1.8 million) through the issue of up to 1,696,699 new ordinary shares (“Open Offer Shares”) on the basis of 2 Open Offer Share for every 45 existing ordinary shares held by Qualifying Shareholders. Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through an excess entitlement application facility. The Subscription and Open Offer are together referred to as the “Capital Raising“.
A circular and a basic information document relating to the Open Offer are expected to be published on or around 6 August 2019.
Admission of the Subscription Shares to trading on AIM is expected to be on or around 6 August 2019 (“First Admission“) and, assuming successful completion of the Subscription and the subsequent launch of the Open Offer, admission of the Open Offer Shares to trading on AIM is expected to be on or around 28 August 2019 (“Second Admission“).
REASONS FOR THE PROPOSED CAPITAL RAISING
The net proceeds of the Capital Raising will primarily be used to fund further clinical development of Clevegen by:
· Completing part I of the MATINS trial to determine the maximum tolerated dose and optimal dose for part II, and to initiate cohort expansion in colorectal cancer (“CRC”) in Q4 2019
· Providing working capital whilst Faron seeks to negotiate and enter into a licensing agreement in respect of Clevegen in H2 2019
In addition, the net proceeds of the Capital Raising will be used to fund the commercialisation preparation of Traumakine by seeking scientific advice and regulatory approval for the CALIBER study in H2 2019.
Subject to a significant proportion of the Open Offer Shares being subscribed for (and/or receipt of alternative sources of funding), the Company plans to execute the Company’s plan to include US study sites to MATINS trial for expansion of distinct cancer cohorts in Q4 2019.
Shareholders and investors should note that the net proceeds of the Subscription are expected to extend the Company’s working capital to the end of Q4 2019 while the proceeds of the Capital Raising (to the extent a significant proportion of the Open Offer Shares are subscribed for) are expected to provide the Company with working capital into early Q1 2020. The Company continues to seek to partner Clevegen (targeting an upfront payment) and while it cannot be guaranteed, the Company hopes to conclude a licencing agreement by the end of 2019. In the meantime, as previously announced, the Company will continue to explore other potential sources of funding.
DETAILS OF THE SUBSCRIPTION AND OPEN OFFER AND ISSUE OF EQUITY
The Subscription Shares and Open Offer Shares will be issued by the Company at the Issue Price (or the Euro Issue Price where applicable) pursuant to the Directors’ existing authority to allot ordinary shares in the capital of the Company (“Ordinary Shares“) for cash on a non-pre-emptive basis, as approved by shareholders at the Company’s last annual general meeting which was held on 28 May 2019. Legally binding commitments have been in received (in the form of subscription letters) in respect of all Subscription Shares.
In order to comply with local securities law in Finland, the Open Offer Shares must be issued and registered at the Finnish Trade Registry prior to Second Admission. Accordingly, whilst application will be made for admission of the Subscription Shares and (in due course) the Open Offer Shares to trading on AIM, neither the Subscription nor the Open Offer are conditional on admission of the relevant shares to trading on AIM. The Subscription and the Open Offer are not being underwritten. The Open Offer is conditional on completion of the Subscription.
Application has been made for admission of the Subscription Shares to trading on AIM. It is expected that First Admission will become effective and that dealings in the Subscription Shares will commence on or around 8.00 a.m. on 6 August 2019.
Faron’s enlarged issued share capital immediately following registration of the Subscription Shares and First Admission will be 38,175,734 Ordinary Shares with voting rights attached. The Company has no shares in Treasury; therefore upon, and subject to, registration, (which is expected to occur shortly) the total number of voting rights in Faron will be 38,175,734 (the “Enlarged Number of Shares and Votes“). This figure may be used by shareholders as the denominator for the calculations by which they will determine whether they are required to notify an interest in, or a change to their interest in, the Enlarged Number of Shares and Votes of the Company.
Further details of the Open Offer will be made available in a circular and basic information document to Shareholders which, subject to completion of the Subscription, is expected to be published on or around 6 August 2019.
RELATED PARTY TRANSACTION
Timo Syrjälä an existing shareholder in the Company, has subscribed for 550,000 Subscription Shares in aggregate (250,000 Subscription Shares subscribed for directly and 300,000 Subscription Shares through Acme Investments SPF Sarl (“Acme“), an entity wholly owned by Mr Syrjälä), for an aggregate subscription value of EUR 0.65 million (£0.54 million) at the Euro Issue Price. Following this Subscription, Mr Syrjälä’s total holding in the Company’s shares, which includes his indirect holding through Acme, is 5,430,375 shares, representing 14.2 per cent. of the Enlarged Number of Shares and Votes. Mr Syrjälä is a “Substantial Shareholder” in the Company for the purposes of the AIM Rules. His subscription for Subscription Shares pursuant to the Capital Raising is a related party transaction for the purposes of the AIM Rules. The Directors, all of whom are independent of Mr Syrjälä, having consulted with Panmure Gordon, the Company’s nominated adviser for the purposes of the AIM Rules, consider the terms of the participation by Mr Syrjälä in the Subscription to be fair and reasonable insofar as Shareholders are concerned.
FARON OVERVIEW
Faron is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs. Faron’s drug development is based on extensive knowledge of receptors involved in regulation of immune responses and vascular dysfunctions. The Company currently has two technology platforms (Clevegen® and Traumakine®) and a pipeline focusing on cancer immunotherapy, acute organ traumas and vascular damage.
The Company’s drug candidate, Clevegen, is an early clinical anti-Clever-1 antibody. The Directors believe that Clevegen has the ability to switch immune suppression to immune activation in various conditions, with potential across oncology, infectious disease and vaccine development. The other candidate is Traumakine, to prevent vascular leakage and organ failures.
Innovations for the business have primarily been sourced from academic institutions including, but not limited to Turku University, Finland. The inventions behind both Traumakine and Clevegen were sourced from scientists working at Turku University (Professor Sirpa Jalkanen, the wife of the Company’s CEO Markku Jalkanen, and Professor Marko Salmi).
The Company is developing its drug candidates through research and discovery, drug development and clinical trials. Discovery and development are guided by top-tier scientists in Faron’s network and the clinical development utilises Company’s in-depth pharmacological knowledge of the drug candidates. The Company aims to accelerate time to market via focusing on rare diseases and/or high unmet medical indications based on its proprietary molecules and IPR. In market access and commercialisation the Company seeks to complementary partner to optimise the usage of resources and to create value. The aim is to gradually build-up integrated global pharma functions
PROGRESS OF CLEVEGEN
In 2019, the Company’s focus has been on the development of Clevegen which is currently undergoing an open label phase I/II MATINS clinical trial. The MATINS study is the first-in-human open label Phase I/II clinical trial with an adaptive design to investigate the safety and efficacy of Clevegen in selected metastatic or inoperable solid tumours. The selected tumours under investigation are cutaneous melanoma, hepatobiliary/hepatocellular, pancreatic, ovarian and colorectal cancer, all known to host a significant number of Clever-1 positive tumour associated macrophages (TAM). All together these five target groups consist of approximately 2 million annual cases worldwide. Cancer patients with high Clever-1 expression are identified with a simple blood myeloid cell staining with Clevegen (“liquid biopsy”).
Clevegen dosing reached its planned maximum of 10mg/kg in mid-June, which has continued to be well tolerated. No dose limiting toxicity (DLT) nor maximally tolerated dose (MTD) has been observed so far. The trial includes an option to administer a 20mg/kg dose, which the Company intends to propose to the trial’s independent data monitoring board.
Of the nine subjects dosed so far in the Clevegen trial, across three clinical trial sites in Finland and the UK, two subjects have shown clinical anti-cancer responses. The first patient, a partial responder with colorectal cancer (“CRC“) whose initial treatment progress was announced on 11 April 2019, showed a continuation of lung metastasis shrinkage according to the latest tumour imaging report at the end of May. The subject’s tumour load marker CEA (carcinogenic embryonal antigen), which measures tumour mass of CRC, has also normalised. A second subject with CRC has shown an initial decrease in CEA (-40%) and tumour stabilization.
The Directors believe that all of the study subjects dosed in the trial have experienced a switch in their immune cell profiles following treatment with Clevegen towards increased immune activation. Typically this has been observed by one or more of the following: increased CD8+ cells, an increased in the CD8+/CD4+ ratio, a decrease in regulatory T-cells (T-regs) and a substantial increase in mobile natural killer (NK) cells in the blood. These changes were measurable immediately post-dosing, indicating a dynamic response in the immunological switch to immune-activation after the immunotherapeutic blockade of Clever-1. Data indicates that dose escalation results in prolonged Clever-1 occupancy of the blood monocytes during the first two weeks of the three-week dosing cycle before a decrease to baseline levels prior to the next dosing cycle.
The majority of patients in the trial have received 5-7 different treatment lines prior entering the MATINS study. Faron is investigating why the observed immune activation has not turned into anti-tumour activity in all study subjects but only in part. The Company believes the patient’s immune system receiving Clevegen as a last line of therapy could have been adversely affected by the underlying therapies they have received prior to taking part in the MATINS study, as previous chemotherapies can inactivate bone marrow, preventing revitalization of the immune system.
As the trial is an open label study, the Company expects to report findings as the dosing progresses. The planned distinct cohort expansions during Part II of the study will focus on identification of patients who show an increased number of Clever-1 positive circulating monocytes and the safety and efficacy of the treatment. The Company has already announced that CRC has been selected as the first expansion cohort in Part II. Faron also intends, subject to regulatory approval, to amend the MATINS trial to allow inclusion of hormone receptor-positive breast cancer, gastric cancer and uveal melanoma, based on striking translational data on CLEVER-1 positive cancer types and current poor survival rates and associated with high Clever-1 expression. Additionally Faron has recently filed a pre-IND package to the FDA. If accepted, Faron plans to open new sites in the US and facilitate expansion of the CRC cohort as fast as possible. Similarly, Faron is planning to include top cancer centres in France and Spain as the next European countries to join the MATINS trial.
TRAUMAKINE UPDATE
Traumakine has previously undergone two phase III studies for the treatment of ARDS (one of these trials being conducted the Company’s Japanese partner, Maruishi). Topline data from the Company’s Phase III INTEREST trial was announced on 8 May 2018 showing that the trial did not meet its primary endpoint although reduced mortality was seen in a sub-group of patients with a biomarker response (MxA and CD73 induction). Further announcements have since been made (including but not limited to those made on 14 June 2018, 22 October 2018, 5 December 2018 and 14 June 2019) in respect of post-hoc analysis from the INTEREST trial and a follow-up pharmacokinetic/dynamic study in health volunteers (YODA). In particular, post-hoc findings from INTEREST and YODA suggest that concomitant use of corticosteroids and Traumakine appeared to adversely affect both the mortality and biomarker appearance among INTEREST trial patients, indicating corticosteroid interference with Traumakine action. Results from the Japanese Traumakine Phase III trial for ARDS, which also included high levels of concomitant corticosteroid use and which were announced on 29 April 2019, were in line with results from the INTEREST trial.
Interim results of the Company’s Phase II study examining the effect of Traumakine on mortality (predominantly multi organ failures (MOF)) and pharmacodynamic biomarkers of surgically operated RAAA patients (INFORAAA trial) were announced 26 June 2019. Whilst biomarker (MxA and CD73) responses indicated a good interferon response from Traumakine, unexpectedly, concomitant corticosterone was recorded both in the active (28%) and placebo (30%) treatment arm. While the removal of corticosteroid-treated patients from statistical analysis reduced group sizes and made statistical interim mortality analysis meaningless, a trend toward reduction of mortality was seen in the Traumakine-treated patients who did not receive corticosteroids.
The Company is conducting a full review of all the Traumakine data with key opinion leaders in order to make decisions on Traumakine’s future development (including continuance of the Company’s INFORAAA trial given the unexpected levels of concomitant corticosteroid use seen in the trial to date). The Company is currently in the process of designing a new global Phase III trial for Traumakine treatment (CALIBER) for the treatment of ARDS taking into account the high levels of concomitant used as a standard of care for ARDS and some RAAA patients and is in the process of seeking regulatory feedback on the proposed trial. The Company envisages that further Traumakine trials are likely to be funded through a third party.
Exchange rate
Unless otherwise specified, this announcement contains certain translations of Euros into amounts in Pounds Sterling for the convenience of the reader based on the exchange rate of £1.00 = €1.124, being the published exchange rate by the European Central Bank at the close of business on 25 July 2019.
MARKET ABUSE REGULATION
Market Soundings, as defined in the Market Abuse Regulation (“MAR“), were taken in respect of the Capital Raising with the result that certain persons became aware of inside information, as permitted by MAR. That inside information in relation to the Capital Raising is set out in this announcement and has been disclosed as soon as possible in accordance with paragraph 7 of article 17 of MAR. Therefore, those persons that received inside information in a Market Sounding are no longer in possession of inside information relating to the Company and its securities.
Panmure Gordon (UK) Limited, which is regulated in the UK by the Financial Conduct Authority, is acting as Nominated Adviser and Corporate Broker to the Company and no one else in connection with the Capital Raising. Accordingly, it will not be responsible to any person other than the Company for providing the regulatory and legal protections afforded to its clients nor for providing advice in relation to the contents of this Announcement or any matter, transaction or arrangement referred to in it.
For more information please contact:
Faron Pharmaceuticals Oy
Dr Markku Jalkanen, Chief Executive Officer
investor.relations@faron.com
Panmure Gordon (UK) Limited, Nomad and Broker
Emma Earl, Freddy Crossley (Corporate Finance)
James Stearns (Corporate Broking)
Phone: +44 207 886 2500
Consilium Strategic Communications
Mary-Jane Elliott
Phone: +44 (0)20 3709 5700
E-mail: faron@consilium-comms.com
Westwicke Partners, IR (US)
Chris Brinzey
Phone: 01 339 970 2843
E-Mail: chris.brinzey@westwicke.com
About Faron Pharmaceuticals Ltd
Faron (AIM:FARN) is a clinical stage biopharmaceutical company developing novel treatments for medical conditions with significant unmet needs. The Company currently has a pipeline focusing on acute organ traumas, vascular damage and cancer immunotherapy. The Company’s first candidate Traumakine, to prevent vascular leakage and organ failures, has completed a Phase III clinical trial in Acute Respiratory Distress Syndrome (ARDS). An additional European Phase II Traumakine trial is underway for the Rupture of Abdominal Aorta Aneurysm (“RAAA”). Faron’s second candidate Clevegen is a ground breaking early clinical anti-Clever-1 antibody. Clevegen has the ability to switch immune suppression to immune activation in various conditions, with potential across oncology, infectious disease and vaccine development. This novel macrophage-directed immuno-oncology switch called Turn-on-your-Immunity or Turn-It may be used alone or in combination with other immune checkpoint molecules for the treatment of cancer patients. Faron is based in Turku, Finland. Further information is available at www.faron.com
Caution regarding forward looking statements
Certain statements in this announcement, are, or may be deemed to be, forward looking statements. Forward looking statements are identified by their use of terms and phrases such as ”believe”, ”could”, “should”, “expect”, “hope”, “seek”, ”envisage”, ”estimate”, ”intend”, ”may”, ”plan”, ”potentially”, ”will” or the negative of those, variations or comparable expressions, including references to assumptions. These forward looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding the Company’s future growth, results of operations, performance, future capital and other expenditures (including the amount, nature and sources of funding thereof), competitive advantages, business prospects and opportunities. Such forward looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors.
A number of factors could cause actual results to differ materially from the results and expectations discussed in the forward looking statements, many of which are beyond the control of the Company. In particular, the early data from initial patients in the MATINS trial may not be replicated in larger patient numbers and the outcome of clinical trials may not be favourable or clinical trials over and above those currently planned may be required before the Company is able to apply for marketing approval for a product. In addition, other factors which could cause actual results to differ materially include the ability of the Company to successfully licence its programmes within the anticipated timeframe or at all, risks associated with vulnerability to general economic and business conditions, competition, environmental and other regulatory changes, actions by governmental authorities, the availability of capital markets or other sources of funding, reliance on key personnel, uninsured and underinsured losses and other factors. Although any forward looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions, the Company cannot assure investors that actual results will be consistent with such forward looking statements. Accordingly, readers are cautioned not to place undue reliance on forward looking statements. Subject to any continuing obligations under applicable law or any relevant AIM Rule requirements, in providing this information the Company does not undertake any obligation to publicly update or revise any of the forward looking statements or to advise of any change in events, conditions or circumstances on which any such statement is based.
